February 28, 2013

Patent Lawyers Urge Congress to Act on Trolls

A group of patent lawyers in Washington said at a panel discussion
today that Congress should solve the problem that patent trolls pose to
innovation, and urged legislators to pass the SHIELD Act to protect American
companies from meritless lawsuits.

Organized by the
Computer & Communications Industry Association, the event was held on
Capitol Hill a day after representatives Peter de Fazio (D-Ore.) and Jason
Chaffetz (R-Utah) introduced a bill to force patent trolls, more formally known
as non-practicing entities, to take financial responsibility for what their
many critics say are their frivolous lawsuits. According to a recent Boston
University study, trolls cost operating companies $29 billion in direct costs
in 2011.

"The dramatic rise in abusive
patent litigation…imposes significant costs on American businesses, threatens
innovation, and is ultimately detrimental to economic growth,” said Senator
Mike Lee (R-Utah) at the event.

Much of this burden falls on small
and medium-sized companies. The same study found that 82 percent of the
defendants in such suits had less than $100 million in revenue. Seth Brown, the
head of litigation at LivingSocial, a company started in a Georgetown apartment
which now employs over 4,000 people worldwide, said they are still in a
start-up mode and have experienced the "pernicious" effects of patent
trolls.

Unlike last year's version of the
SHIELD Act, this year's bill applies to all types of patents. If a troll
decides to bring a patent case and loses, it will be its responsibility to pay
all associated costs and attorneys' fees. Independent investors,
businesses and universities would not be required to pay the opposing party's
fees in a lawsuit even if they lose.

Alan Schoenbaum,
senior vice president and general counsel at Rackspace, an IT hosting company,
said dealing with patent trolls is time consuming, extremely costly, and harms
innovation.

Erik Lieberman, regulatory counsel
for the Food Marketing Institute, said it is not just "a high-tech issue,
but a general business one," citing a supermarket being sued for
using clickable menus on its website as an example. "Patent trolls are a
huge problem for our industry…costing retailers and wholesalers millions of
thousands in legal fees, settlements, and other resources each year."

Edward Goodmann, policy and
research manager at EngineAdvocacy, said patent trolls also make entrepreneurs
unsure about how to build their business more effectively. "Engineers,
developers, people who run startups and entrepreneurs do not understand what
really this thing means," he said. "The system is not transparent or
understandable to the people building the technology."

Brown, who has litigated patent
case in China, said this is just an American problem. "We hear about the
Chinese who do not respect patents; that was not my experience at all."

All the panelists, including Julie
Samuels, a patent lawyer with the Electronic Frontier Foundation, said patents
are often too complicated and too overbroad to be understood.

Samuels said what happens is that
startups, companies and individuals who receive demand letters give in and
prefer to pay rather than take the risk to engage in a legal battle. "We
think they are just paying the trolls to go away because who wants to deal with
litigation?" she said.